China extends NEV subsidies to 2022

The Chinese government will extend its subsidy scheme for new energy vehicles (NEVs) to the end of 2022, the country's ministry of finance announced today.

China will reduce the subsidies on regular NEVs by 10pc in 2020 from a year earlier, and by 20pc in 2021 and 30pc in 2022.

Subsidies on new energy urban buses, commercial passenger vehicles, taxis, sanitation vehicles, urban logistics vehicles, mail services vehicles, airport shuttle buses and government cars will not be reduced this year, but will be cut by 10pc in 2021 and by 20pc in 2022. This is designed to accelerate electrification in the public transport sector.

The subsidies will apply only to passenger cars costing less than 300,000 yuan ($42,376) per unit. Beijing will also raise the requirements for the driving range and power efficiency of NEVs that qualify for the subsidies.

A pure electric car should have at least 300km of driving range to qualify for a Yn16,200-22,500 per unit subsidy. The minimum driving range for a plug-in hybrid is 50km for a subsidy of Yn8,500/unit.

The new scheme will take effect on 23 April. It follows the government's granting of an exemption from the purchase tax on NEVs for next year and 2022.

China produced 105,000 NEVs during January-March, down by 60.2pc from a year earlier, with sales of 114,000 NEVs falling by 56.4pc over the same period, amid the impact from the Covid-19 outbreak, according to data from China's automotive manufacturers association.

China's NEV production and sales have been falling since July 2019, following lower subsidies and a slowdown in the country's economy growth. Several government departments, including the ministry of commerce, in March urged local governments to offer subsidies for new car purchases and "old-for-new" purchases, in an attempt to stabilise the domestic automotive market.

The Beijing municipal government will release an additional 100,000 licence plates for NEVs in the first half of this year to encourage sales of family cars.

The Chinese government in March 2019 reduced the subsidies for NEVs from the national government and set a three-month transition period from 26 March to 25 June. Local governments have stopped offering NEV subsidies after the transition period, except for new energy buses and fuel-cell vehicles.